Thursday, October 4, 2012



Hike rail fares, power tariff: Panel

TNN | Oct 4, 2012, 06.53AM IST
NEW DELHI: A panel on Wednesday recommended raising railway passenger fares and electricity tariff among a string of measures needed to fast track infrastructure development. 


The panel headed by HDFC chairman Deepak Parekh, which submitted its report to the government on Wednesday, also called for raising the foreign direct investment (FDI) limit in the telecommunications sector to 100% from the current 74%, removing regulatory uncertainties related to allocation , pricing and sharing of spectrum allotted in the past and rationalizing mergers and acquisition policies to facilitate consolidation in the sector. The panel had been set up to examine gaps in the infrastructure sector and suggest steps to accelerate financing projects in the key segment vital to boosting growth. 

The panel, which submitted its report to Prime Minister Manmohan Singh, has also recommended that issues related to the General Anti-Avoidance Rules (GAAR) and delays in environmental clearances and land acquisition be resolved to attract investment in the infrastructure sector. "Overarching impediments such as delays in land acquisition and environmental clearances, taxation/ GAAR related issues and regulatory uncertainties need to be addressed urgently," the panel said in its report. 
Infrastructure investment in the 12th five year plan (2012-17 ) is estimated at Rs 51.46 lakh crore at 2011-12 prices and out of this the private sector is expected to contribute about 47% of the total investment against 37% in the 11th Plan. The panel noted the present infrastructure deficit implies large unmet demand and said there is robust interest among domestic and foreign investors. 

"The committee, therefore, viewed these projections as realistic, subject to removal of constraints. Business as usual approach is unlikely to deliver this level of investment," the panel said. For the crucial power sector, it said government should adopt PPP in distribution while import of coal through STC/MMTC or directly through power producers should be allowed. It said adoption of PPP in coal mining should be explored while setting up a state-run undertaking for engaging in PPP. 

The panel recommended rationalizing gas allocations and pricing within two months and importing gas to increase generation and utilize idle capacity. It said gas-based power should only be used in peak hours. 

It said that the India Infrastructure Finance Company (IIFCL) should substitute its direct lending operations by guarantee operations to enable the flow of non-bank long term credit for infrastructure projects, particularly insurance and pension funds. IIFCL should only lend to tenures of 20 years or more since commercial banks are able to lend for up to 15 years. The panel said IIFCL should start raising funds on the strength of its balance sheet instead of sovereign guarantees. The panel said the government should encourage investment through public private partnership mode in redevelopment of railway stations, building of elevated suburban corridors in Mumbai. It also called for institutional restructuring of the railway board. On roads and bridges, the panel called for low-traffic two-lane highways, developed through EPC (turnkey) contracts and recommended setting up of an Expressway Authority. For the oil and gas pipelines, the panel backed the idea of introducing independent operators to provide non-discriminatory access to all suppliers and consumers. 

The panel said the government should expedite award of Greenfield airports in Navi Mumbai, Goa, Kannaur and Chandigarh, encourage PPP in operation and maintenance of metro airports at Chennai and Kolkata. 

THE PRESCRIPTION 

Reform electricity distribution Set tariffs at sustainable levels Adopt PPP in distribution Import coal through STC/MMTC or directly through power producers Encourage investment through PPPs in Railways New freight corridors Institutional restructuring of the Railway Board IncreaseFDI limit in telecom to 100% from 74% Expedite award of greenfield airports in Navi Mumbai, Goa, Kannur and Chandigarh.

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